The SEC and CFTC fined Wall Street firms a collective $1.8 billion for discussing trades on illicit messaging apps. In an investigation reported by Reuters in October 2021, US regulatory agencies found brokers discussing trades through WhatsApp and iMessage. Using these messaging services to discuss trades and deals breaks record-keeping laws that require brokers to preserve all business communications. Here’s everything you need to know about the SEC and CFTC’s hefty Wall Street fine.
The SEC and CFTC fined Wall Street firms for illicit communications.
The SEC and CFTC fined firms such as Bank of America, Citigroup, Morgan Stanley, and Barclays. According to WSJ, some banks face up to $200 million in fines, a number usually only seen for fraud cases.
Since President Biden took office, the SEC pushed for tighter restrictions and higher penalties to prevent potential wrongdoings. Last year, JPMorgan Chase’s brokerage firm paid a $200 million fine for using WhatsApp and the like for business communications.
According to Reuters, Wall Street firms have had trouble preventing workers from using personal devices for work communications for years. However, as Wall Street brokers worked from home throughout the pandemic, the problem only worsened. “We used WhatsApp all the time, but we delete convos regularly,” said one trader, according to the CFTC.
Wall Street has a history of disregarding communication regulations.
WSJ reports one head of a trading desk at Bank of America explicitly ordered employees to delete their messages. That trading desk head resigned earlier this year after they were caught telling subordinates to only use encrypted messaging apps.
According to the report, one trader at Nomura Holdings made false statements and deleted conversations the CFTC wanted to investigate. Furthermore, at JPMorgan, regulators couldn’t collect some messages because brokers used personal devices the company didn’t supervise.
CFTC Commissioner Christy Goldsmith Romero said, “[t]hose choosing to participate in US financial markets are on notice: the era of evasive communications practices is over.”
